Section 194LA - TDS on Compulsory Acquisition Compensation
# TDS on Compensation for Compulsory Acquisition — Section 194LA
## When TDS Applies
Any person paying to a resident any sum being compensation or consideration for compulsory acquisition under any law of any immovable property (other than agricultural land).
## Threshold
TDS applies only if such payment, or aggregate payments to the resident in the FY, exceeds ₹ 5,00,000.
## Rate
10% (subject to PAN being furnished).
## Note
Agricultural land is excluded — no TDS on compensation for compulsory acquisition of agricultural land.
Worked example
### Example 1
Example 1 — ₹ 2,30,000 paid to Mr. Bharat for compulsory acquisition of his house (1.1.2026)
Payment ≤ ₹ 5,00,000 → No TDS.
### Example 2
Example 2 — ₹ 2,00,000 paid to Mr. A on 22.2.2026 by the State of U.P. on compulsory acquisition of urban land
Payment ≤ ₹ 5,00,000 → No TDS.
⚠️ Common exam mistakes
Deducting TDS on compensation for compulsory acquisition of agricultural land — excluded from section 194LA.
Applying section 194LA to voluntary sales — the section applies only to compulsory acquisition under a law.
Forgetting the ₹ 5 lakh threshold and deducting on smaller payments.
Bare-Act text Section 194LA · Income-tax Act, 1961 · click to expand
Section 194LA - Any person responsible for paying to a resident any sum, being in the nature of compensation or the enhanced compensation or the consideration or the enhanced consideration on account of compulsory acquisition, under any law for the time being in force, of any immovable property (other than agricultural land), shall, at the time of payment of such sum in cash or by issue of a cheque or draft or by any other mode, whichever is earlier, deduct an amount equal to ten per cent of such sum as income-tax thereon.
Provided that no deduction shall be made under this section where the amount of such payment or, as the case may be, the aggregate amount of such payments to a resident during the financial year does not exceed five lakh rupees.